Are gloomy U.S. economic forecasts really justified?

It would be easy for farmers to be pessimistic this spring. Our country is at war; fertilizer and fuel prices have been rising, commodity prices have not; Sen. Grassley has re-introduced his payment limit legislation; weather delays have interrupted planting; etc.; etc.

I realized I was becoming rather depressed myself when I picked up an article by one of my favorite contrarians. For years, Roy Ferguson, an agricultural consultant and publisher of the monthly Ferguson Ag Report, has been railing against the doom and gloom that has pervaded much of U.S. agriculture.

Writing in the March issue, Ferguson said a multitude of warnings have been issued about the lack of recovery by the U.S. economy in recent months and what it portends for the future.

“Despite the fact that underlying factors have changed very little, a noticeable trend toward extreme negativism has emerged,” he writes. “The majority's former expressions of acutely illogical optimism for a quick economic rebound are being replaced by equally unwarranted projections for five to 10 years of economic collapse.”

Ferguson agrees that worries abound, including the weak economic performance of the last quarter, unemployment seemingly stuck around 6 percent, declines in productivity leading to higher labor costs and reduced petroleum output in Venezuela and the Middle East pushing oil prices higher.

But are the gloom and doom forecasts justified? “Simple reality is that widespread, spooked psychology has become the controlling factor rather than fundamental economics…which have actually changed very little during the past year,” he says.

He said energy costs and the prospects for continued overproduction of grains and livestock are major concerns for U.S. agriculture.

In a separate article, Ferguson says U.S. dependence on foreign oil — 56.5 percent of our supply now comes from outside the country — cries out for Congress to pass legislation that would boost domestic oil production.

Congress must remove bans on oil exploration not only on the Alaskan National Wildlife Reserve — which the Senate voted against doing a few days ago — but also on federally owned lands in the West and deep water areas in the Gulf of Mexico, he says, if the country is to be less dependent on foreign oil.

That doesn't mean shifting trading away from the Middle East, according to Ferguson. Canada actually supplied more oil to the United States than Saudi Arabia in 2002, and the labor unrest in Venezuela's oil fields have had more to do with rising prices than conflicts in the Middle East. (Congress also needs to seek new ways to reduce dependence on fossil fuels, he notes.)

Energy costs and availability in a time of war will remain major worries for ag producers; but should not be the overriding concerns.

“Whether the nation's business and manufacturing sectors continue depressed or recover either slowly or spectacularly will have minimal direct impact on U.S. farmers' and ranchers' personal financial situations,” he says.

“Absolutely no doubt exists that these are serious times for many reasons. Soundly thinking people will strive to be poised to defend their personal financial status. But this is no time to stampede into mental funk.”